10/19/2010 @ 6:00PM

Luxury Brands Still Tread Lightly With Social Media

For a sector as forward-thinking as the fashion industry, the reluctance with which it has ventured into e-commerce and other digital platforms–particularly social media–is more than a little perplexing.

The affinity for traditional commerce and marketing channels is strong among many purveyors of luxury goods, both in the fashion sector and elsewhere. In an international survey of 178 premium and luxury firms in 2008,
Forrester Research
found that only one-third of them actively sold online, though 8 out of every 10 affluent consumers use the Internet to actively research and purchase luxury goods and services on a daily basis.

That number has risen significantly, but it is still strikingly low. Federico Marchetti, founder and chief executive of Italian retailer Yoox, estimates that half of luxury brands now sell directly online, though several others suggest that the percentage is higher, due largely to recession pressures.

Yet many brands, particularly European manufacturers of high-end wristwatches and other luxury goods, refuse to set up shop online.

From Store to Web: The Challenges of E-Commerce

“We have an exclusive network of over 400 retailers but that cannot work online,” Jean-Claude Biver, chief executive of Hublot, said at Reuters Global Luxury Summit last summer. “When you are online, you are not exclusive anymore.”

Other firms say that e-commerce is not an option because the shopping experience their brands provide cannot be successfully translated for the Web.

Matt Rhodes, who directs social media strategy for a number of high-end travel and fashion companies at FreshNetworks London, observed that when consumers walk into a luxury retailer, they’re paying for more than just the goods themselves.

“If you’re going to spend $1,000 on a pair of shoes, you want to have a glass of wine going around, the attention of staff; you want an experience as well as a purchase,” he said. From store design to employee training, luxury firms have invested heavily in building these kinds of experiences for customers, making retail locations feel “less like sales rooms and more like intimate venues,” Rhodes said.

It’s difficult to recreate that environment on the Web. Some brands, like Burberry and Christian Louboutin, offer close-up video footage of their products, allowing shoppers to examine the texture and drape of a python trench coat or glitter of a jeweled strap as if they were holding the product in the store. Online retailer Net-a-Porter replicates the high-caliber service of a brick-and-mortar store by offering same-day shipping to customers in New York and London, and handling returns for its premier customers. Oscar de la Renta extends its in-store services, such as styling advice and garment alterations, to online shoppers over phone and e-mail, CEO Alex Bolen said.

Bolen said he was “dead wrong” about how well the company’s staple product–close-fitting, $4,000 cocktail dresses–would sell online. “We have done a very good job of selling very expensive, very fit-intensive garments I thought only sold in a fitting room,” he said. Customers will often order two sizes of the same dress and return one. Currently, online transactions count for less than 10% of overall sales, but Bolen easily envisions that someday the Web will be the biggest “door” for purchasing Oscar de la Renta merchandise.

Beyond Design: Brands Become Content Creators

The Web has also become an important marketing channel for many high-end brands. Even those adverse to e-commerce are producing brand-enriching media content to display on their websites and, for those willing to sacrifice a little design control for better distribution, platforms like Facebook, Twitter and YouTube. Chanel, which does not sell directly online, released a series of artistic short films directed by designer Karl Lagerfeld and Martin Scorsese this summer. Dozens of high-end fashion, jewelry and travel firms have released image and video-rich apps for
Apple’s
iPhone and iPad devices in the past three years as well.

During London Fashion Week, Burberry Chief Creative Officer Christopher Bailey wrote on Twitter that Burberry is “now as much a media-content company as [it is] a design company because it’s all part of the overall experience.” Like many other fashion houses, Burberry released a heavy amount of video and photographic footage of its catwalk show, giving fans the ability to peak backstage and watch the show live online.

Lost Opportunities in Social Media

Luxury brands are less enthusiastic about social media marketing, though. Having a Facebook page requires forsaking a degree of control many simply aren’t comfortable with, Rhodes explained.

“It’s like going to someone else’s party and talking to people there, versus throwing your own catwalk show where you control the invites,” Rhodes said. “On your own domain, you can curate an experience for people; on Facebook, you are opening the gates … to discussions you don’t [necessarily] want.”

While large consumer brands like
Pepsi
and Dunkin’ Donuts are launching major interactive campaigns across many social networks–engaging sometimes millions of fans in the process–few such campaigns are coming from luxury brands. Most use it as another channel to distribute news and imagery to enhance the brand; some use it as a direct attempt to drive sales on their websites by posting a link to purchase alongside an image of a new product, for instance.

There are, of course, exceptions among brands with an interest in marketing to aspirational shoppers. BMW and Marc Jacobs both publicized the launch of products aimed at a younger demographic–an SUV and a men’s fragrance, respectively–with social campaigns on Facebook this year. Jimmy Choo garnered considerable attention in mainstream and online press with its Catch-a-Choo campaign on location-based social gaming network Foursquare. The campaign had women running around London in order to snag a pair of the company’s new line of sneakers at various venues the brand broadcasted over the network. Oscar de la Renta was even able to facilitate the purchase of a bridal gown after tweeting about a bridal trunk show taking place at Bergdorf Goodman.

These instances, however, are rare and forsake opportunities to engage affluent–rather than aspirational–shoppers. A recent Unity Marketing survey of 1,614 consumers with an average income of $240,000 found that nearly 80% of them have at least one social networking profile (usually on Facebook), and that roughly half have used social media to connect with a brand in some way, such as viewing products or commenting. Another recent survey of affluent consumers (from households earning more than $150,000 per year) by L.E.K. Consulting found that the influence of social media on purchase decisions is growing. Participants said they were likely to buy 12% of the products recommended to them by friends on social networks.

In a market where brands are constantly making products more innovative to stay ahead of the competition, it’s odd that so few resources are invested in reinventing how that product is marketed and delivered on the Web. Leaders are beginning to emerge in the luxury sector; it will remain to the rest to decide whether to innovate and thrive, or be left behind.

Lauren Indvik is an assistant editor at Mashable, where she covers media, marketing and fashion.